SPXBearish long day. Midpoint above EMA(10). Above all SMA's. Tested and failed 1177.84 (the .0344 fibo from high). No daily 3LB changes (reversal is 1165.32) - so close so close. QE2infinity (aka the beginning of the end).

DXYBullish long day (confirmed gravestone doji). Midpoint above EMA(10). Tested its 76.4% retrace at 76.29 and passed. Still below 78.41 (.0557 from low). Daily 3LB reversal up (reversal is 76.65).

GOLDBearish long day (aka CB's fight back). Still above all SMA's. Midpoint below EMA(10). No test of new 0% retrace. Daily 3LB reversal down (reversal is 1377.60).

EURUSDBearish long day (confirming dark cloud cover a day late). Midpoint below EMA(10). Back below its 61.8% retrace at 1.3899. Above all SMA's. Daily 3LB reversal down (reversal is 1.4049).

JNKBullish short day again (but closed lower). Above all SMA's. Midpoint above EMA(10). Held the 100% retrace. No daily 3LB changes (reversal is 40.01).

10YR YIELDBearish long day. The 0.0% fibo retrace at 23.59 is the line in the sand. Still below the weekly 3LB mid (25.35) and SMA(21). Midpoint above EMA(10). No daily 3LB changes (reversal is 23.81).

DJ TRANS AVGBearish long day (rising three method pattern failure). Holding above the upper trend line and all SMA's. Midpoint above EMA(10). No daily 3LB changes (reversal is 4583.57).

One of the arguments for quantitative easing is the notion that the Fed's purchase of $1.5 trillion of Fannie Mae and Freddie Mac debt somehow "pulled the U.S. economy back from the abyss" of a Depression. But a closer examination of the past 19 months suggests that a much more specific mechanism - suspension of truthful disclosure - was actually the key element. Unfortunately, the benefits of this suspension are also impermanent, because the underlying solvency problems have been left unaddressed.

In early 2009, many major U.S. banks were faced with clear capital shortfalls that effectively rendered them insolvent - their liabilities exceeded their assets. Instead of restructuring this debt, or dealing with the problem in a sustainable way, the Financial Accounting Standards Board, responding to Congressional pressure, suspended "mark to market rules" and allowed major U.S. financials to use "substantial discretion" in valuing their assets. Since it was neither possible nor credible for banks to immediately write up those assets overnight, loans from the Troubled Asset Relief Program (TARP) were critical in bridging the immediate shortfall. Over the following quarters, banks substantially wrote up their assets, and they issued a large volume of additional stock. The new issuance created a moderate but legitimate improvement in the financial position of these banks, but the asset writeups appear to be inconsistent with the growing volume of delinquent and unforeclosed homes, and the deteriorating debt-service performance of commercial mortgage-backed securities. Presently, the U.S. financial sector is essentially opacity masquerading as solvency.

As Meredith Whitney has observed, the "recovery" of the U.S. financial sector has been a two stage process - massive writeups of troubled assets on balance sheets, followed by large reductions in loan loss reserves on income statements. This activity has not only driven the improvement in operating earnings reported by banks, but has been one of the primary contributors to the recovery in the aggregate earnings of the S&P 500 Index. It is not a process that should be extrapolated.

As for Fed purchases of U.S. agency securities, there is little doubt that these actions allowed the U.S. housing market to function, albeit at a weak level, over the past 18 months. But this cannot be credited to anything inherent in quantitative easing. Rather, the Fed did something that neither the American public, nor the U.S. Congress were willing to do democratically: it essentially guaranteed Fannie Mae and Freddie Mac debt by taking massive amounts onto its own balance sheet. This was later followed up by more explicit 3-year guarantee by the Treasury (through the end of 2012).

Think of it this way. If Fannie and Freddie had already been explicitly protected by the full faith and credit of the U.S. government, their securities would have been indistinguishable from U.S. Treasury securities, and housing activity through Fannie and Freddie would have proceeded without any action by the Fed. It wasn't quantitative easing that helped the housing market. It was the Fed's willingness to put the U.S. public on the line for any losses sustained by these two insolvent financial institutions.

By purchasing $1.5 trillion in Fannie Mae and Freddie Mac obligations, the Federal Reserve has placed U.S. taxpayers in the position of absorbing whatever additional losses will come on two-thirds of the nation's mortgages. Prior to the Fed's actions, the bondholders of these institutions had no right to the full faith and credit of the U.S. government, but the Fed's massive purchases of this debt are now effectively irreversible without such a guarantee. There appears to be no way for the Fed to extricate itself from this position without provoking massive economic dislocations, except through continued Treasury guarantees to make this agency debt whole so that private market participants will buy it back. By making that "monetary policy" decision, the Fed has actually forced an act of fiscal policy.

As Meredith Whitney has observed, the "recovery" of the U.S. financial sector has been a two stage process - massive writeups of troubled assets on balance sheets, followed by large reductions in loan loss reserves on income statements.

exactly- solvent banks brought to you by mark to fantasy-

sure makes me feel warm and fuzzy about the banks- now that they are solvent

also strange because back in the day they didn't ban Pumps...Dee Brown even won a dunk contest in them!

http://hoopedia.nba.com/index.php?title=DeCovan_%22Dee%22_Brown

I had a pair of Reebok Pumps...man when I pumped those things up I had like.....4.3ish, 4o speed, or, at least Pumps claimed to have made you "better" at sports....really though it just made the shoe more snug. Guess that damn social mood wants to keep em down....

Relatives down south still have a farm with cows, pigs, chickens. Plus some fields with corn and some type of bean. There's a catfish pond down the road too. Have to brush up on my tractor driving skills :-)

http://www.aolnews.com/nation/article/young-adults-are-new-face-of-homelessness/19678303.~~~~~~~~~~~~~Whenever I see stories like this, I immediately think about what some entrepreneur might be able to do with groups of 18-25 year olds who have no home or job.

There's probably a private solution in there there somewhere, but with a mandatory minimum wage, it makes it very difficult.

I'm sure there are some private employers in areas that could provide a mix of room+board+cash in exchange for work.

It's difficult to understand how certain nations, with huge shipping costs (logistic hurdles) to the US, can sustain a competitive advantage in certain areas when we have 2mm YOUNG workers who aren't working and have no place to live.

"Try" to read him? Oh come on. What's the alternative? Barry Ritholtz or Calculated Risk or David Goldman? They are douchebags, that is their livelihood. Even Mish is on the fence at this point! It amazes me that you folks still read BR at all. Correct me if I'm wrong, but not so long ago this site was founded on the tacit proposition that BR is unbearable.

True, but there is so much puffery and bluster everywhere you look. If you try to understand all viewpoints--rather than focusing on informed and sincere ones--you run a high risk of getting sold a bill of goods. Nothing is perfect, but you can't do much better than Hussman, IMO. Particularly now that mannwich is AWOL.

This seems to be one of those mornings where the basic index numbers do not tell the whole story...the NAZ futs are up more than 9, but AAPL is down (slightly) ISRG down big, ALKS down big, AMLN down huge...guess something nasty happened in biotech land.

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This blog should not be interpreted as investment advice of any kind.The authors are NOT representing themselves CTAs or CFAs or Investment/Trading Advisor of any kind.The authors may or may not trade in the markets discussed.The authors may hold positions opposite of what may by inferred by this blog.The information contained in this blog is taken from sources the authors believes to be reliable, but it is not guaranteed by the authors as to the accuracy or completeness thereof and is presented here for information purposes only. Commodity trading involves risk and is not for everyone.

Fictional Character Quote of the Day:

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- Andy Dufresne

"The Shawshank Redemption"

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This Blog's primary focus is on trading based upon technical analysis. It is run by "AmenRa" and "AndyT," quasi-anonymous traders who employ technical analysis to assess market conditions and trading opportunities. AmenRa utilizes 3LB techniques, Moving Averages and Fibonacci sequences. AndyT's analysis relies primarily on "Wave Theory" and Fibonacci sequences. The Comments Section is uncensored and open to the public. Please try and adhere to the "Blogger Policy."